Stocks were little changed on Monday as China's weakening demand for materials weighed on resource shares and as the imminent start of earnings season pushed investors to the sidelines.
Market players were trying to hold onto gains made last week -- the best week for stocks in a year -- but were wary of what surprises earnings season could bring. Dow component Alcoa Inc reports its second-quarter results after the closing bell.
Alcoa fell 1.5 percent to $10.78. Poor demand for materials could hurt Alcoa's results, and analysts have lowered their quarterly earnings forecast for the company 10 times in the last month, according Thomson Reuters data.
Investors will be kicking the tires of corporate results to ascertain whether the economic recovery is still on track, said John Stoltzfus, senior market strategist at Ticonderoga Securities in New York.
The rearview mirror of the actual results (will be) less important than any guidance or forward looking forecasts that management will provide, Stoltzfus said.
The Dow Jones industrial average <.DJI> dipped 1.67 points, or 0.02 percent, to 10,196.36. The Standard & Poor's 500 Index <.SPX> was off 1.32 points, or 0.12 percent, to 1,076.64. The Nasdaq Composite Index <.IXIC> edged down 0.62 points, or 0.03 percent, at 2,195.83.
Resource shares led the way down, with the S&P Materials index <.GSPM> sliding 1.1 percent after Chinese data over the weekend showed the country's copper demand dropped. Freeport McMoRan Copper & Gold Inc lost 4.6 percent to $62.92.
U.S.-listed shares of BP Plc jumped 7.2 percent to $36.49 with the British company in talks with U.S. oil and gas company Apache Corp and others to sell assets worth up to $10 billion.
In addition to Alcoa, other Dow components set to report earnings this week include Intel Corp , JPMorgan Chase & Co and General Electric Co .
Alcoa's stock has sent mixed signals from a technical perspective of late. Alcoa is holding above its 14-day moving average, but below the 50-day and 200-day averages.
Some option investors are bracing for potential volatility around Alcoa's earnings.
Among the top trades was a buyer of August $11 straddles, a volatility options play that would make money if Alcoa makes a large percentage move in either direction after the company releases their results later today, said WhatsTrading.com option strategist Frederic Ruffy.
For the second quarter, analysts see earnings growth of 27 percent for companies in the S&P 500, according to Thomson Reuters data, up from previous readings in the past three quarters, which hovered around 22 percent. This would also exceed the 22.4 percent analysts were predicting at the beginning of the year.
(Additional reporting by Doris Frankel; Editing by Padraic Cassidy)